Alcohol duty freeze extended

• Alcohol duty freeze extended six months from 1 February to 1 August 2023
• Part of government’s responsible management of UK economy, plan aims to reassure and provide certainty to pubs, breweries and distilleries facing tough challenges ahead
• End date aligns with new simpler alcohol tax system taking effect, with Chancellor reserving decision on future duty rates for Spring Budget 2023

The freeze to UK alcohol duty rates has been extended six months to 1 August 2023, the government announced yesterday (19 December 2022).

In a statement to the House of Commons, Exchequer Secretary to the Treasury James Cartlidge laid out a plan designed to provide certainty and reassure pubs, distilleries, and breweries as they face a challenging period ahead.

While new duty rates usually come in on the 1 February each year, Mr Cartlidge set out that this year the duty rates decision will be held until the Chancellor Jeremy Hunt delivers his Spring Budget on the 15 March 2023.

Further, the Minister made clear that if any changes to duty are announced then, they will not take effect until 1 August 2023. This is to align with the date historic reforms for the alcohol duty system come in, and amounts to an effective six month extension to the current duty freeze.

As part of the government’s commitment to responsible management of the UK economy, these changes will provide pubs, breweries, distilleries and other alcohol-related businesses with increased certainty to plan and make investment decisions more effectively.

Exchequer Secretary to the Treasury James Cartlidge said: “Today’s announcement reflects this government’s commitment to responsible management of the UK economy and supporting hospitality through a challenging winter.

“The alcohol sector is vital to our country’s social fabric and supports thousands of jobs – we have listened to pubs, breweries and industry reps concerned about their future as they get ready for the new, simpler, alcohol tax system taking effect from August.

“That’s why we have acted now to give maximum certainty to industry and confirmed there will be just one set of industry-wide changes next summer.”

The current alcohol duty freeze was announced at Autumn Budget 2021, saving consumers over £3 billion over five years. It was expected to come to an end on 1 February 2023, following the Chancellor’s reversal of most of September’s Growth Plan to restore trust in the economy and strengthen public finances.

At Autumn Budget 2021 the government announced the biggest reforms to alcohol duty in 140 years. The changes overhaul the UK’s outdates rules following exiting the EU by radically simplifying the entire system and slashing red-tape. To give industry more time to prepare, September’s Growth Plan set out that the reforms would take effect from 1 August 2023.

The new alcohol tax system will adopt a common-sense approach, where the higher a drink’s strength the higher the duty, whilst new reliefs will be made available to help pubs and small producers thrive.

New Draught Relief will be worth £100 million a year and will ensure smaller craft producers can benefit, the threshold for qualifying containers will be 20 litres.

Small Brewers Relief will be renamed Small Producer Relief, reformed and expanded. Until the revamp, a cliff-edge existed when relief is withdrawn for brewers who make more than 5,000 hectolitres a year.

This will be addressed, there will instead be a gradual taper to the removal of relief, which will empower small breweries to grow, after they had made clear through consultation that the current design was acting as a barrier. Further, the expansion of the relief means that all producers that make drinks below 8.5% – mostly craft brewers and cidermakers – will be able to get relief on their products.

The alcohol duty reforms will help create a simpler, fairer and healthier duty system. Higher rate for sparkling wines will come to an end, meaning they will pay the same rate as still wine. Liqueurs will be put on the same footing as fortified wine, meaning a sherry and Irish Cream will now pay the same duty, and super-strength ‘white cider’ will rise to address public health concerns. 

The wine industry will also be supported as they adapt to the new system. All wine between 11.5-14.5% alcohol by volume (ABV) to calculate duty as if it were 12.5% ABV for 18 months from the implementation of the new system.

A UK Spirits Alliance spokesperson said: “Today’s decision by HM Treasury comes as extremely welcome news to distillers across the country. We know that previous duty freezes have enabled distillers across the UK to invest in supply chains, tourism centres and local communities.

“The announcement today is a major boost to the industry at such a crucial time. We look forward to working with the Chancellor over the coming months as he makes a decision on the future of alcohol duty at the Spring Budget.”

Miles Beale, Chief Executive, the Wine and Spirit Trade Association, said: “We are extremely pleased to hear that the Chancellor has listened to our calls not to deliver a double whammy tax hike next year.

“History has shown that freezing alcohol duty delivers increased revenue to the Exchequer. If duty rates went up by RPI on February 1st, this would have been a crippling blow to the UK alcohol industry and consumers who would have to pay the price for tax rises.

“Delaying any increase until 1 August means businesses will not have to manage two duty rises in the space of 6 months.  We hope that any duty increases applied in August take into account the damage suffered by wine and spirit businesses and the hospitality sector during the pandemic as businesses continue to fightback.

“We are calling on Jeremy Hunt to cancel double digit tax rises to help cash-strapped consumers and to support the UK’s world-class drinks industry.”

Emma McClarkin, Chief Executive, the British Beer and Pub Association said: “The decision to extend the freeze on beer duty will be welcomed by pubs and brewers alike.

“In 2022 our industry has faced pressures and challenges like never before. This freeze will allow £180million to be reinvested into our sector at a critical moment and inject a much-needed flurry of festive cheer for pubs and breweries. It shows the Government understands just how much our pubs and brewers mean to communities across the UK.

“Investment in our sector now will pay dividends in villages, towns and cities across the country for generations to come. Pubs and brewers are a crucial thread in the social fabric of our society and contribute not only economically but socially, connecting people in communities up and down the country.

“We look forward to working with the Government to implement the promised duty reforms in 2023 ensuring a fair and modernised rates system in the UK that support lower-strength products and our country’s pubs.”

Richard Naisby, National Chairman, Society of Independent Brewers said: “Independent breweries play a vital role in the British hospitality industry and are embedded in their local communities, providing jobs and adding greatly to local economies across the UK.

“The extension of the beer duty freeze comes as welcome news to these vital independent businesses, providing some certainty until the summer.

“We look forward to working with Treasury on delivering further positive changes for the hospitality and independent brewing industry.”